The IoT Drives Flex Toward Pure, Real-Time Procurement

August 24, 2015 at 8:46 AM

Tom Linton was a bit breathless when contacted for this story.

He had just finished a reorganization project that centralized his massive global procurement and supply chain (GPSC) organization. It was a project that coincided with an epic rebranding of Flex, the Silicon Valley contract manufacturing and logistics behemoth transforming from its roots as an EMS (Electronics Manufacturing Service) and supply chain solutions company to a leading “sketch-to-scale” player in the 21st century connected world, as Michael Mendenhall, Chief Marketing and Communications Officer, quipped in announcing the firm’s new name in late July.

For Linton and others, shortening Flextronics’ name to its root word makes perfect sense for a company well-known for outside-the-box creative solutions that bring devices to market in record time.

To wit: Flex is poised as a dominant player in a global supply chain that now values velocity and data as much as intellectual and real capital, and Linton is at ground zero. He was almost giddy when describing Flex’s new “Pulse Center,” a Norad-like monitoring system that gives real-time visibility to the $26 billion company’s massive supply chain run by 20,000 people in 30 countries across four continents. The facility features wall-to-wall touch screens and flowing data visualizations, including real-time data streaming.

“It’s like a mission control center for our operations,” Linton, Flex Chief Procurement and Supply Chain Officer, tells My Purchasing Center. “We monitor all our supply chain, from demand to supply, in one room. I can drill down and inventory on any site. I have Tandberg live video feeds, I can look at customer and supplier data, I can look at quality. I can drill down into any issues. It’s way beyond anything NASA ever had.”

Linton also likens the new facility to the White House Situation Room. It’s no surprise he pulls out that cabinet-level reference since hosting Secretary of Commerce Penny Pritzker the week before our interview. “She was awed,” Linton muses.

Much has happened at Flex since My Purchasing Center last profiled the company in 2013. Not only did its supply chain tentacles grow even longer. They grew wider.

Today, the company is serving a massive horizontal array of markets, from data networking, telecom, and enterprise computing and storage, to industrial, capital equipment, appliances, automation, medical, automotive, aerospace and defense, energy, and mobile computing.

Flex also is waist-deep (and deeper) in the wearable tech explosion, which along with its market expansion, is creating new challenges for the Flex GPSC.

“One of the challenges in the wearable space is with smart apparel,” says Linton. “We’re putting electronics in clothing. I don’t think people who’ve grown up in the electronics industry also specialized in cotton and other raw materials for fabrics.”

But that’s exactly what Flex is doing. “It’s expanding our commodity and sourcing from a procurement standpoint across a much broader spectrum,” Linton adds. “We’re actually working with farmers and other people in agriculture, trying to understand some of the dynamics and the way soils, weather, etc., can interact with the raw materials, and in turn, the electronics we’re placing inside these fabrics.”

Flex has long not followed the traditional procurement organization model – a vertically integrated structure that supports a set of commodities for certain products. “Mine is growing wide horizontally across commodities – everything from oil and gas to meters,” Linton says. “We’re building coffeemakers now. Some of this stuff is even designed by us. We’re putting parts in all kinds of automobiles. We have a big automotive business. A big medical business. Surgical tools. Hospital beds. I could go on and on.”

The ‘Intelligence of Things’

Much of the company’s current efforts and future plans were laid out to investors in a May 4 meeting in midtown Manhattan.

On display was a scaled down Pulse Center mockup, but it was the “Internet of Things” that took center stage for much of the day’s presentations from Linton and other company executives.

As he talked about a new marketplace that will represent nearly 10% of the world’s $80 trillion economy within five years, Chief Executive Officer and Director Michael McNamara introduced investors to a new frontier for Flex – the Intelligence of Things.

"We believe the disruption and the opportunity that's been created [by the Internet of Things] are the end-points being connected. We call those end-points the Intelligence of Things," McNamara said. "It's a great opportunity for us to participate. We expect that by 2020, over 50 billion devices will be attached and when we think about our role in the economy, our role in the marketplace and our role in enabling electronics into many different devices, we are very well positioned to take advantage of this change."

“Every object has an opportunity to have some form of embedded electronics in it,” Linton tells My Purchasing Center. “You don’t have to look too far to see things embedded in everything. And so, the connected world, connectivity, the intelligence of things as we call it, is really making everything intelligent – from all the normal electronic devices, including everything medical, to aerospace, industrial, and automotive, and has moved beyond consumer electronics to a whole range of things. You have the connected person and the connected car, who parks it in a connected home, who lives in a connected city and a connected world. This is what’s keeping us on our toes nowadays.”

It’s All in the Name

Nimbleness also is occupying a lot of brilliant minds at Flex these days, including Linton’s. The Internet has fueled a caffeinated, insatiable innovation binge, and an entirely new kind of procurement talent.

It’s the horizontal expansion of our industry – not the vertical,” says Linton, a former IBM supply chain management executive and LG Electronics procurement executive. “And so, the skill sets of procurement people I’m looking for now have to be much broader than ever before because we’re looking for someone who has the agility to move, to deal with electronics in different scenarios. Cars might have a 10-year warranty on their parts. Consumer electronics may have a three-year warranty. And then you go to aerospace and defense, which we are now servicing, and they have 25-year warranties. How do you deal with that? What kind of agility do you need in terms of dealing with suppliers with a whole different range of specifications? And then you have the applications, like I said, everything from apparel to rockets, where you have a huge range of applications. That’s what’s both exciting and extremely challenging – to be able to work on that breadth and depth. It takes a tremendous amount of experience to have the right people to do that.”

In the first year following the centralization project, Flex’s procurement organization, indeed, got very agile. In addition to notching $217 million in material savings, supplier managed inventory nearly doubled (from 28% to 45%). Flex earned a top award from the Institute for Supply Management earlier this year for these and other efforts relating to the procurement reorganization project.

As My Purchasing Center earlier reported, Linton is credited with helping to speedily transition the company from a contract manufacturer to a global supply chain company in just under two years. “The CEO created a new objective in 2012 called ‘One Flex,’ meaning one team, one flex and one plan,” Linton says. Before Linton came on board, procurement functions were handled separately for all of the myriad industry segments Flextronics served, each headed by a vice president of procurement. Today, those division heads all report up to Linton. “There was a leveraging effect from that, which saved a lot of money and increased efficiency,” he says.

‘The Rise of Real-Time Information’

Real-time visibility and the speed at which it’s made available is a laudable goal, and with Linton at the helm, Flex is approaching it at near light speed. Flex’s three largest markets – datacom, telecom and servers/storage – all involve data.

According to Linton, one day of improvement and the asset velocity and the speed of a supply chain using real-time information is equal to $65 million worth of cash.

The procurement executive says his presentation to investors was designed to be focused on the rise of real-time information. And he delivered.

“We believe that building capability around visibility is really critical to making a supply chain faster, live and more intelligent,” Linton told the group. “But at the same time, we have to be able to navigate around risk because risk is what happens daily in a supply chain – whether it comes from disruptions from the outside or the inside, whether it's a supply problem or quality problem. Risk monitoring in management is essential.”

Another essential element involves the speedy execution of commercial transactions, preferably on a mobile platform. “It has to be multi-tenant. It has to be multi-enterprise. It has to be cloud-based, so the data can move to people where they work wherever they are in the world,” Linton added.

Linton asserted that the problem with so many of today’s supply chains is they run on antiquated architecture run on vertical stacks of software, plagued by artery clogging information silos, costly tools and stagnant, paper- or PC-based information.

“Most ERP and MRP systems are actually batch-based systems, so what they do is provide information on an hourly, daily or weekly basis. I equate that with driving a car with a speedometer that’s telling me how fast I was going yesterday,” Linton tells My Purchasing Center. “Not only is that dangerous, it causes me to slow down. It’s a lowest common denominator. So if one of my systems is providing me latent information, I am not dealing with real time. And if my fuel tank says ‘This is your fuel level as of last Friday,’ no good.

“You can’t drive a sourcing or procurement process based upon data that isn’t real-time, so my challenge to everyone in the company is this: I want to take our entire operations to real-time,” he adds. “So I’ve taken every system and broken it down to determine which one is real time, and which one isn’t.

If inventory or purchase order data is arriving on a weekly basis or forecasts are coming monthly, for example, that has to change to real-time, according to Linton.

In addition to this ardent drive toward real-time, Linton has challenged his team to incorporate predictive systems. “I want to create systems that are going to tell me what’s going to happen around the corner or turn, so I can move to predictive intelligence,” he adds. “I think with the amount of tools and systems and the way we have data now not only can we get real-time information, but predictive data as well. And that will be a game changer.

Linton says he believes the next generation of procurement leaders “will be dealing with real-time knowledge, data-driven knowledge that will tell them from the analytics what’s happening today, and they’ll be able to tell us not only exactly where they are at any given time, but where they need to go in the next week, month, quarter. I call this the rise of real-time information.”

When procurement people view the quest for real-time information in the context of the intelligence of things, “You start to rev your engine up to a different speed, a different capability than you had before,” Linton adds. “Because visibility gives you velocity. If you’re driving your car with your headlights off, your velocity goes down. If you have more visibility, your velocity increases. It’s a way of actually thinking of our processes as a cadence for how much we can accomplish in a certain period of time, because time is our enemy and our friend. If we can get more done in a shorter period of time, we’ll be able to produce more, generate more revenue, save more money, manage our assets better and realize better results.”

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